I just read this post over on the RARS board from art35. I thought it is a good read for all here,,,especially with the problem using TD and Fidelity!
Why Joe Arcaro, Lazar and oravec are held in high regard!!!
The prospective custodian of a dormant Nevada company must meet requirements set by state law. First, he must be a shareholder of the company.
We know from court filings that our applicant purports to have purchased shares of stock of each entity he’s interested in before he files a custodianship petition.
A custodianship action may be brought in two circumstances: if the company directors are so divided that any vote they may take would be split; and if the business has been abandoned, and no steps have been taken to dissolve, liquidate or distribute its assets.
Applicant relies on the second option, seeking shells whose management has not made any filings with the state for several years.
The applicant must also provide certain information specified by the Nevada statute, along with an affidavit in which he swears to its truth and accuracy. He must include a list of all previous applications for custodianship of a publicly traded company filed in any jurisdiction; if those applications were granted, he must supply a detailed description of the activities he performed as custodian including reverse stock splits and share issuances.
The custodian must also append a description of the current corporate status and business operation of those companies. He must in addition disclose “any and all previous criminal, administrative, civil or National Association of Securities Dealers, Inc., or Securities and Exchange Commission investigations, violations or convictions concerning the applicant and any affiliate or subsidiary of the applicant.”
That would include sanctions by the Commodity Futures Trading Commission (CTFC), and any state or federal actions, no matter how old. We note many custodians hiding behind their affiliates such as corporate egos to conceal required disclosure of background matters despite representing to the court that no such matters exist. Examples of administrative actions includes actions by the CFTC, state and federal administrative actions no matter how old.
These high standard of disclosure was created because custodians are fiduciaries to the other shareholders of the corporation whom they are obligated to protect even above their own self interest. Lastly, he must provide evidence of an attempt to contact the officers and directors of the company in question. That is practically achieved by serving them through the company’s resident agent, if it still has one, or by mail at the company’s last known address.
If the custodianship is granted, the applicant must set a date for a shareholder meeting, and inform all shareholders of record of it; he must then inform the court of actions taken at the meeting.
He must also reinstate or maintain the company’s corporate charter, and show that he is “continuing the business and attempting to further the interests of the shareholders.”
Unfortunately, custodians of dormant penny shells often disregard those fiduciary duties, performing reverse splits and other actions that may affect the size and value of the holdings of the very shareholders the custodian is obligated to protect. ((THIS IS WHY SOME FIRMS LIKE TD and FIDELITY DO NOT ALLOW PURCHASES))
These actions are taken to make the vehicle more attractive to a potential buyer. Once the vehicle is purchased, the custodian and his associates pocket the proceeds from the sale as payment for their purported “services” as a fiduciary and custodian.
